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Notice2023-21786

Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Pricing Schedule at Options 7, Section 4 Regarding Marketing Fees

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Published
October 3, 2023

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 88 Issue 190 (Tuesday, October 3, 2023)</title>
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[Federal Register Volume 88, Number 190 (Tuesday, October 3, 2023)]
[Notices]
[Pages 68186-68187]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-21786]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98561; File No. SR-Phlx-2023-44]


Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend Pricing 
Schedule at Options 7, Section 4 Regarding Marketing Fees

September 27, 2023.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 13, 2023, Nasdaq PHLX LLC (``Phlx'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I, II, and III, below, 
which Items have been prepared by the Exchange. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to a proposal to amend its Pricing Schedule 
at Options 7, Section 4.
    The text of the proposed rule change is available on the Exchange's 
website at <a href="https://listingcenter.nasdaq.com/rulebook/phlx/rules">https://listingcenter.nasdaq.com/rulebook/phlx/rules</a>, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Exchange's Pricing Schedule at 
Options 7, Section 4 to specify the application of its marketing fees. 
Today, the Exchange delineates pricing for multiply-listed options in 
Options 7, Section 4, including marketing fees (``Marketing Fees''). 
The Marketing Fees for multiply-listed options are assessed on Lead 
Market Makers,\3\ Market Makers,\4\ and Directed Market Makers \5\ for 
trades resulting from either Directed or non-Directed Customer Orders 
\6\ that are delivered electronically and executed on the Exchange, 
with certain specified exceptions, including the exclusion of 
transactions in broad-based index options symbols listed in Options 7, 
Section 5.A.
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    \3\ The term ``Lead Market Maker'' applies to transactions for 
the account of a Lead Market Maker (as defined in Options 2, Section 
12(a)). A Lead Market Maker is an Exchange member who is registered 
as an options Lead Market Maker pursuant to Options 2, Section 
12(a). An options Lead Market Maker includes a Remote Lead Market 
Maker which is defined as an options Lead Market Maker in one or 
more classes that does not have a physical presence on an Exchange 
floor and is approved by the Exchange pursuant to Options 2, Section 
11.
    \4\ The term ``Market Maker'' is defined in Options 1, Section 
1(b)(28) as a member of the Exchange who is registered as an options 
Market Maker pursuant to Options 2, Section 12(a). A Market Maker 
includes SQTs and RSQTs as well as Floor Market Makers.
    \5\ The term ``Directed Market Maker'' means a Market Maker that 
receives a Directed Order in accordance with Options 2, Section 10.
    \6\ The term ``Directed Order'' means any order to buy or sell 
which has been directed to a particular Lead Market Maker, RSQT, or 
SQT by an Order Flow Provider, as defined in Options 2, Section 10. 
To qualify as a Directed Order, an order must be delivered to the 
Exchange via the System.
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    The Exchange now proposes to amend the rule to specify that no 
Marketing Fees will be assessed on transactions in options symbols 
subject to Options 7, Section 5 pricing \7\ to make clear that the 
exclusion also applies to all singly listed options subject to pricing 
in Options 7, Section 5.C and Options 7, Section 5.D (in addition to 
broad-based index options symbols in Options 7, Section 5.A, as 
currently specified). The Exchange notes that this is not a change to 
current practice; rather, the proposed changes are intended to 
memorialize how the Exchange currently assesses Marketing Fees. Today, 
the Exchange already indicates in the header of Options 7, Section 4 
that the pricing set forth in Section 4 (including Marketing Fees) 
applies only to multiply listed options excluding SPY and the broad-
based index options in Options 7, Section 5.A. Section 4 specifically 
excludes the broad-based index options in Options 7, Section 5.A 
because some of the symbols (like NDX) are multiply listed. 
Furthermore, Options 7, Section 5 specifically indicates that the 
pricing set forth in this Section 5 applies to index options and singly 
listed options. By implication, options that are singly listed on Phlx, 
and that are subject to Options 7, Section 5.C and Section 5.D pricing 
are excluded from Options 7, Section 4 pricing like the Marketing Fees. 
However, the Exchange believes that further clarity will be helpful by 
explicitly stating this exclusion in the Marketing Fees portion of 
Section 4 to avoid potential confusion by market participants and 
investors.
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    \7\ Options 7, Section 5 sets forth pricing for index and singly 
listed options (includes options overlying FX Options, equities, 
ETFs, ETNs, and indexes not listed on another exchange).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\8\ in general, and furthers the objectives of Sections 
6(b)(4) and 6(b)(5) of the Act,\9\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among members and issuers and other persons using any facility, 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed changes in Options 7, 
Section 4 to specify that no Marketing Fees will be assessed on 
transactions in options symbols subject to Options 7, Section 5 pricing 
are reasonable because the changes will make clear that the exclusion 
also applies to all singly listed options subject to pricing in Options 
7, Section 5.C and Options 7, Section 5.D (in addition to broad-based 
index options symbols in Options 7, Section 5.A, as currently 
specified). As discussed above, the proposed changes will not amend 
current practice; rather, the proposed changes are intended to 
memorialize how the Exchange currently assesses Marketing Fees. While 
the Exchange already indicates which sections of its Pricing Schedule 
apply to which options in the manner discussed above, the Exchange 
believes that further clarity will be helpful by explicitly stating in 
the Marketing Fees pricing program itself that all symbols subject to 
Options 7, Section 5 pricing

[[Page 68187]]

will be excluded from the Marketing Fees in order to avoid potential 
confusion by market participants and investors. The Exchange also 
believes that it is reasonable to exclude singly listed options in 
Options 7, Section 5 from the Marketing Fees because the purpose of 
this program is to generate more Customer order flow to the Exchange. 
Because singly listed options are exclusively listed products on Phlx, 
the Exchange does not believe that applying Marketing Fees is necessary 
for these products.
    Lastly, the Exchange believes that its proposal to memorialize that 
all options symbols subject to Options 7, Section 5 pricing are 
excluded from the Marketing Fees program set forth in Options 7, 
Section 4 is equitable and not unfairly discriminatory because the 
program will uniformly exclude all market participant orders in these 
symbols. As noted above, the Exchange's proposal does not alter its 
existing Marketing Fees program, but instead memorializes current 
practice.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that its proposal would impose an undue burden on intra-market 
competition. The proposed changes will memorialize current practice 
that no Marketing Fees will be assessed on transactions in options 
symbols subject to Options 7, Section 5 pricing, which will continue to 
apply uniformly to all market participant orders in such symbols.
    In terms of inter-market competition, the Exchange notes that it 
operates in a highly competitive market in which market participants 
can readily favor competing venues if they deem fee levels at a 
particular venue to be excessive, or rebate opportunities available at 
other venues to be more favorable. In such an environment, the Exchange 
must continually adjust its fees to remain competitive with other 
exchanges. Because competitors are free to modify their own fees in 
response, and because market participants may readily adjust their 
order routing practices, the Exchange believes that the degree to which 
fee changes in this market may impose any burden on competition is 
extremely limited.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#99ebecf5fcb4faf6f4f4fcf7edead9eafcfab7fef6ef"><span class="__cf_email__" data-cfemail="047671686129676b6969616a7077447761672a636b72">[email&#160;protected]</span></a>. Please include 
file number SR-Phlx-2023-44 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-Phlx-2023-44. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-Phlx-2023-44 and should be 
submitted on or before October 24, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21786 Filed 10-2-23; 8:45 am]
BILLING CODE 8011-01-P


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